If the former President of Tanzania, the late Dr. John Magufuli was nicknamed bulldozer for his strong, unwavering will in controlling the public sector, the incumbent soft-spoken President Samia Hassan is in no way any softer; on the contrary, she has a hawk eye on the public sector.
Most evident is the proposed fiscal law, the Finance Bill of 2021, which now requires at least three major public companies to relinquish their revenue to the Central Bank and to await their expense funding from a central government operator to be dished out in line with their annual approved budgets.
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The public bodies to be affected by the law are the Tanzania Ports Authority (TPA), the Tanzania Communications Regulatory Authority (TCRA) and the Tanzania Shipping Agencies Corporation (TASAC).
Dubbed the Finance Bill of 2021, the document was passed for public hearing on June 18 and 19, formally tabled in Parliament and passed on June 22. Now that parliament has passed it, it is expected that President Samia will sign and approve it as early as July 1, 2021.
The Finance Act of 2021, this new law is meant to rein in these three multibillion dollar enterprises. Already, back in April, President Samia removed and replaced the director generals of all three bodies – the TPA, TCRA and TASAC.
The three heads of these public companies, Deusdedit Kakoko, James Kilaba and Emmanuel Ndomba respectively, came under censure by President Samia’s administration for what is being termed as ‘questionable operational practices’.
What we did not know was that their hoisting was only the first part of a larger sweeping change to come; it was cutting off the head of ‘an iron snake’ so to speak and now the body is being thrown into the fire to be beaten into shape.
There is an African saying, ‘when you see your fellow getting shaved, wet your own head’. This literally means ‘get ready or be prepared’ or ‘learn from others’ mistakes’. As these three public organs undergo these major changes in leadership and financial management structures, other public companies are expected to follow suit.
The new law now empowers the Controller and Auditor General to audit all corporations in which the government has stake.
Sitting in the spotlight of this new law is Twiga Minerals, the aftermath company born of the government and Acacia Gold Mining company. After Acacia was pushed out for alleged tax evasion and under-declaring mineral values back in 2017, the government and Barrick Gold, which took over Acacia’s stakes, entered into partnership under the new firm Twiga Minerals in which the government owns 16 percent shares across three separate gold mines i.e. Bulyanhulu, North Mara and Buzwagi. The government also receives taxes, royalties and fees.
For the case of Twiga, the law now requires the company to maintain primary data servers in the country “for effective accessibility of the information,” it reads. How Barrick Gold will receive this new law remains to be seen, but having data about the country’s gold, the largest exporter earner at hand will go a long way in managing and monitoring revenue due to the government.
This new law also has another provision that may not be very palatable, particularly to foreign investors, and that is the issuance of fluid Share Warrants. The law will now require issuance of much more solid Share Certificate whose transfer is only valid with support of a Transfer Deed.
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Let’s break these mouthful legal terms into small, chewable words. A Share Warrant is a document issued by a company stating that its bearer is entitled to the shares or stock specified therein. They are fluid negotiable instruments, so to speak, allowing for easy and non-obligatory transfer of shares or stocks without any requirement of registration of the said transfer.
On the other hand, a Share Certificate refers to a document which is issued by a company as evidence of the transfer of shares to the person named on the certificate. This means that companies will have to specify the transfer of shares via the Share Certificates instead of just giving away the shares via the traditional non obligatory Share Warrants.
Under the former Share Warrants, a company could be registered by Mr. X and Mrs. Y and the shares could be transferred to Mr. W and Mrs. Z without necessarily naming them. In other words, the company ownership could be transferred without necessarily naming the new owners but rather, by simply issuing a bearer’s document that does not specify anyone in particular but grants ownership to whosoever has the document in hand.
Breathing Room: Easing Taxes Under New Law
It is not all fire and brimstone in the new law; there is a silver lining. The law also allows for tax exemptions in several strategic government projects as specified in the 2021/2022 national budget.
Also, by merit of the new fiscal changes, the Value Added Tax Act will now “allow zero rating of transportation of crude oil”. The VAT free transportation of crude oil is specific for oil transported via the East African Crude Oil Pipeline (EACOP). It also extends to what is described as other “incidental services” and to “enable computation of depreciation of assets” as pertaining to construction of the pipeline.
Further still, under the new law, the power of the Finance Minister is significantly umped. For example, when it comes to tax exemptions for the EACOP, the Minister can bypass Cabinet and grant tax exemptions to any party he/she judges deserving in an effort to fast-track implementation of the said projects.
This new power of the Minister does not end with the EACOP; it also applies to other projects funded from external sources or through non-concessional loans.
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The extension of power under the new law also flows over to the Tanzania Revenue Authority (TRA) which will now have the mandate to omit VAT on imported goods or services that are meant to feed any of the so-called strategic government projects like the Standard Gauge Railway (SGR).
Other areas where the new law cuts taxes are the importation of used motorcycles, fuel, and very surprisingly, it also lowers taxes for imported alcoholic beverages and taxes imposed on winnings in betting games.
To be specific, the Minister proposed to amend the Gaming Act by a reduction of Gaming tax on winnings from 20% to 15% on sports betting. However, it calls for an increase in gaming tax rate on the Gross Gaming Revenue from 25% to 30%.
A matter for discourse on a different article is the fact that the new law also introduces levies on airtime and mobile money transfers. Does this mean Tanzanians have to spend more to use mobile phones? And what will this financial burden on this basic necessity mean for the common man?
